AN ACT RELATIVE TO REVERSE MORTGAGE LOANS.
Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:
SECTION 1. Subsection (B) of section 2 of chapter 167E of the General Laws, as appearing in the 1996 Official Edition, is hereby amended by striking out paragraph 14A and inserting in place thereof the following paragraph:-
14A. Reverse Mortgage Loans. A reverse mortgage loan, pursuant to the provisions of any program for reverse mortgage loans which has been submitted to and approved by the commissioner, to the owner of real estate improved with a dwelling designed to be occupied by not more than four families; provided, however, that each such owner shall be at least 60 years of age and shall occupy the mortgaged real estate in whole or in part; and provided further, that a person shall be deemed to be the owner of real estate notwithstanding that legal title thereto is held in the name of a trust if said person is the beneficiary of such trust.
For the purposes of this paragraph, a reverse mortgage loan shall not be considered a residential mortgage transaction, as defined in section 1 of chapter 140D or any other transaction specified in subsection (e) of section 10 of said chapter 140D. The notices and rights contained herein shall be in addition to the disclosure and rights provided for in said chapter 140D, including the right of rescission set forth in said section 10 of said chapter 140D.
The proceeds from a reverse mortgage loan shall be disbursed to the borrower, pursuant to the provisions of such program, and together with unpaid interest, if any, shall become due and payable: (i) at the end of a fixed term, if any; (ii) upon the death of the borrower; (iii) upon the conveyance of title to the mortgaged real estate; (iv) upon such borrower ceasing to occupy such real estate as a principal dwelling; or (v) upon default by the borrower in the performance of its obligations under the loan agreement.
The commissioner shall not approve any program for reverse mortgage loans which does not include the following:
(1) the type of loan, whether open-end or closed and whether a recourse or non-recourse loan;
(2) an applicant for any such loan shall not be bound for seven days after his acceptance, in writing, of the lender's written commitment to make the loan;
(3) the bank shall obtain a written statement signed by the borrower acknowledging receipt of disclosure of all contractual contingencies which could force a sale of the mortgaged real estate;
(4) a provision permitting prepayment of the loan without penalty at any time prior to said loan becoming due and payable;
(5) the interest rate, which may be fixed or variable, and the method of calculation thereof shall be established at loan origination; quote and, at the option of the borrower, may be contingent on the value of the mortgaged real estate at closing or at maturity or on changes in said value during the period between closing and maturity;
(6) the method of disbursement of the proceeds of the loan to the borrower; provided, however, that at the request of the borrower, disbursement may be made to a third party pursuant to the terms of the loan agreement;
(7) a copy of the form of the note and mortgage deed that will be utilized for such loans;
(8) a detailed description of how the plan will function; and
(9) such other information as the commissioner may require.
Prior to making any such loan, a bank shall provide a prospective borrower with written materials explaining in plain language, the type of mortgage being offered and its specific terms, including but not limited to:
(a) a schedule, if applicable, and explanation of payments to the borrower pursuant to the terms of the mortgage agreement and whether or not property taxes and insurance premiums are to be deducted;
(b) a schedule of outstanding debt over time, if applicable;
(c) repayment date, if a fixed term loan, and other provisions which cause the loan to become due and payable;
(d) method of repayment and schedule, if any;
(e) all contractual contingencies, including lack of home maintenance and other default provisions which may result in a forced sale of the mortgaged property;
(f) interest rate and annual percentage rate, and for a reverse mortgage loan for a specified term, total interest payable thereon;
(g) loan fees and charges;
(h) description of prepayment and, if applicable, refinancing features; and
(i) inclusion of a statement that any such mortgage has tax and estate planning consequences and may affect levels of, or eligibility for, certain government benefits, grants or pensions, and that applicants are advised to explore such matters with appropriate authorities.
A bank shall not make a reverse mortgage loan as provided in this section until it has received a notice, in writing, that the prospective borrower has completed a reverse mortgage counseling program which has been approved by the executive office of elder affairs and which shall include instruction on reverse mortgage loans. Any such program shall include, but is not limited to, the subject matter of subparagraphs (1) to (9), inclusive, with respect to all reverse mortgage loan programs approved by the commissioner pursuant to this section. For the purpose of providing such counseling, said executive office of elder affairs shall establish and maintain a list of counseling programs approved by it and shall make such list available to all banks and to the public.
A reverse mortgage loan shall constitute a lien against the property securing the loan to the extent of all advances made pursuant to the reverse mortgage and all interest accrued on such advances, and the lien shall have priority over any lien filed or recorded after recordation of a reverse mortgage loan.
The commissioner may promulgate regulations necessary to carry out the provisions of this paragraph.
For the purposes of this paragraph, the term "non-recourse reverse mortgage loan" shall mean a reverse mortgage loan which limits the lender's recovery solely to the value of the property at the time the loan becomes due and payable.
The provisions of sections 96 to 114A, inclusive, of chapter 140 shall not apply to a reverse mortgage loan.
SECTION 2. The seventh paragraph of section 65 of chapter 171 of the General Laws, as appearing in the 1996 Official Edition, is hereby amended by striking out paragraph 5A and inserting in place thereof the following paragraph:-
5A. A credit union may make a reverse mortgage loan, pursuant to the provisions of any program for reverse mortgage loans which has been submitted to and approved by the commissioner, to the owner of such real estate improved with a dwelling designed to be occupied by not more than four families; provided, however, that each such owner shall be at least 60 years of age, and shall occupy the mortgaged real estate in whole or in part; and provided further, that a person shall be deemed to be the owner of real estate notwithstanding that legal title thereto is held in the name of a trust if said person is the beneficiary of such trust.
A reverse mortgage loan, for the purpose of this paragraph, shall not be considered a residential mortgage transaction, as defined in section 1 of chapter 140D or any other transaction specified in subsection (e) of section 10 of said chapter 140D. The notices and rights contained herein shall be in addition to the disclosure and rights provided for in said chapter 140D, including the right of rescission set forth in said section 10 of said chapter 140D.
The proceeds from a reverse mortgage loan shall be disbursed to the borrower, pursuant to the provisions of such program, and together with unpaid interest, if any, shall become due and payable: (i) at the end of a fixed term, if any; (ii) upon the death of the borrower; (iii) upon the conveyance of title to the mortgaged real estate; (iv) upon such borrower ceasing to occupy said real estate as a principal dwelling; or (v) upon default by the borrower in the performance of its obligations under the loan agreement.
The aggregate balance of such loans made or acquired by a credit union shall not exceed 10 per cent of its deposits; provided, however, that such balance shall not include any such loans sold into the secondary mortgage market.
The commissioner shall not approve any program for a reverse mortgage loan which does not include the following:
(1) the type of loan, whether open-end or closed and whether a recourse or non-recourse loan;
(2) an applicant for any such loan shall not be bound for seven days after his acceptance, in writing, of the lender's written commitment to make the loan;
(3) the credit union shall obtain a written statement signed by the borrower acknowledging receipt of disclosure of all contractual contingencies which could force a sale of the mortgaged real estate;
(4) a provision permitting prepayment of the loan without penalty at any time prior to such loan becoming due and payable;
(5) the interest rate, which may be fixed or variable, and the method of calculation thereof shall be established at loan origination; and, at the option of the borrower, may be contingent on the value of the mortgaged real estate at closing or at maturity or on changes in said value during the period between closing and maturity;
(6) the method of disbursement of the proceeds of the loan to the borrower; provided, however, that at the request of the borrower, disbursement may be made to a third party pursuant to the terms of the loan agreement;
(7) a copy of the form of the note and mortgage deed that will be utilized for such loan;
(8) a detailed description of how the plan will function; and
(9) such other information as the commissioner may require.
Prior to making any such loan, a bank shall provide a prospective borrower with written materials explaining in plain language, the type of mortgage being offered and its specific terms, including but not limited to:
(a) a schedule, if applicable, and explanation of payments to the borrower pursuant to the terms of the mortgage agreement and whether or not property taxes and insurance premiums are to be deducted;
(b) a schedule of outstanding debt over time, if applicable;
(c) repayment date, if a fixed term loan, and other provisions which cause the loan to become due and payable;
(d) method of repayment and schedule, if any;
(e) all contractual contingencies, including lack of home maintenance and other default provisions which may result in a forced sale of the mortgaged property;
(f) interest rate and annual percentage rate, and for a reverse mortgage loan for a specified term, total interest payable thereon;
(g) loan fees and charges;
(h) description of prepayment and, if applicable, refinancing features; and
(i) inclusion of a statement that any such mortgage has tax and estate planning consequences and may affect levels of, or eligibility for, certain government benefits, grants or pensions, and that applicants are advised to explore such matters with appropriate authorities.
A credit union shall not make a reverse mortgage loan as provided for in this section until it has received notice, in writing, that the prospective borrower has completed a reverse mortgage counseling program which has been approved by the executive office of elder affairs and which shall include instruction on reverse mortgage loans. Any such program shall include, but is not limited to, the subject matter of subparagraphs (1) to (9), inclusive, of this section with respect to all reverse mortgage loan programs approved by the commissioner pursuant to this section. For the purpose of providing such counseling, said executive office of elder affairs shall establish and maintain a list of counseling programs approved by it and shall make such list available to all credit unions and to the public.
A reverse mortgage loan shall constitute a lien against the property securing the loan to the extent of all advances made pursuant to the reverse mortgage and all interest accrued on said advances, and the lien shall have priority over any lien filed or recorded after recordation of a reverse mortgage loan.
The commissioner may promulgate such regulations necessary to carry out the provisions of this paragraph.
For the purposes of this paragraph, the term "non-recourse reverse mortgage loan" shall mean a reverse mortgage loan which limits the lender's recovery solely to the value of the property at the time the loan becomes due and payable.
The provisions of sections 96 to 114A, inclusive, of chapter 140 shall not apply to a reverse mortgage loan.
SECTION 3. The provisions of this act shall be applicable to a reverse mortgage loan entered into on and after the effective date of this act; provided, however, that a reverse mortgage loan program approved and in effect in the commonwealth on said effective date is hereby deemed approved.